04 The full syllabus – management level
P2 – A. PRICING AND PRODUCT DECISIONS (30%) continued Learning outcomes On completion of their studies students should be able to:
Lead
Component
2. analyse short-term pricing and product decisions.
(a) (b) (c) (d)
explain the usefulness of dividing costs into variable and fixed components in the context of short-term decision making; interpret variable/fixed cost analysis in multiple product contexts to break-even analysis and product mix decision making, including circumstances where there are multiple constraints and linear programming methods are needed to identify ‘optimal’ solutions; discuss the meaning of ‘optimal’ solutions and how linear programming methods can be employed for profit maximising, revenue maximising and satisfying objectives; analyse the impact of uncertainty and risk on decision models based on CVP analysis.
3. discuss pricing strategies and their consequences.
(a) (b) (c)
apply an approach to pricing based on profit maximisation in imperfect markets; discuss the financial consequences of alternative pricing strategies; explain why joint costs must be allocated to final products for financial reporting purposes, but why this is unhelpful when decisions concerning process and product viability have to be taken.
P2 – B. COST PLANNING AND ANALYSIS FOR COMPETITIVE ADVANTAGE (30%) Learning outcomes On completion of their studies students should be able to:
40
Lead
Component
1. evaluate techniques for analysing and managing costs for competitive advantage
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) (m)
compare and contrast value analysis and functional cost analysis; evaluate the impacts of just-in-time production, the theory of constraints and total quality management on efficiency, inventory and cost; explain the concepts of continuous improvement and Kaizen costing that are central to total quality management; prepare cost of quality reports; apply learning curves to estimate time and cost for new products and services; apply the techniques of activity-based management in identifying cost drivers/activities; explain how process re-engineering can be used to eliminate non-value adding activities and reduce activity costs; explain how target costs can be derived from target prices and the relationship between target costs and standard costs; discuss the concept of life cycle costing and how life cycle costs interact with marketing strategies at each stage of the life cycle. discuss the concept of the value chain and the management of contribution/profit generated throughout the chain; discuss gain sharing arrangements whereby contractors and customers benefit if contract targets for cost, delivery etc. are beaten; analyse direct customer profitability and extend this analysis to distribution channel profitability through the application of activity-based costing ideas; apply Pareto analysis as a convenient technique for identifying key elements of data and in presenting the results of other analyses, such as activity-based profitability calculations.
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CIMA qual brochure V209.indd 40
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